Unemployment Claims Down Slightly

Department of Labor data show that weekly jobless claims fell by 6,000 last week to a level of 388,000.  These data are notoriously volatile so the four-week moving average is a more reliable number and was up 3,250 to 394,250.

Analysis: Both of the above figures are well within the realm of a statistical error and future revisions to the data may swing 180 degrees from these results.  Embedded in that story though is the fact that jobless claims are holding steady and to such a degree that it is hard to tell which direction they are moving: up or down.  In conjunction with other data that suggest businesses are finally starting to hire, this means that the unemployment rate has to finally be improving.

Overall weekly jobless claims are below the important break point of 400,000.  Why is this important?

An economy needs to create jobs every month just to keep up with population growth.  Then there are all of the jobs that need to be created to replace the jobs lost during the Great Recession.  Jobless claims above 400,000 are an indication that the economy is not creating enough jobs to overcome these two thresholds and means that the unemployment rate is likely getting worse.  Below 400,000 – as we have had now for many weeks – means that the economy is creating jobs fast enough to lower the unemployment rate.

I am certain that first quarter gross domestic product growth is going to be good, if not very good.  That, coupled with robust corporate profit growth, should result in an increase in business confidence.  So I am anticipating a more rapid improvement in the unemployment rate in the second quarter.

Importance grade: 4; this one number in isolation is largely meaningless.  However, I continue to track the trend because until unemployment is in the 7-8% range, or even better yet, around 7%, it will be hard to say that the hangover effects of the Great Recession are behind us.

Jason